Canada Country Profile - Economy, Currency, Central Bank, Canadian Dollar, CAD

Introduction

Canada is the 8th largest economy in the world with GDP valued at C$1.269 trillion in 2006, and a population of 32 million. The country has been growing consistently since 1991. Canada is currently the world's 5th largest producer of gold and the 14th largest producer of oil. However, two-thirds of the country's GDP comes from the service sector, which employs 3 out 4 Canadians. Manufacturing and resources are very important for the Canadian economy, as it represents over 25% of the country's exports.

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Canada's Fundamental Indicators and Chart

Monthly Data for April, 2008

Date	EST	Indicator	Actual	Forecast	Previous
4/1	8:30am	Producer Price Index	0.1%	0.7%	0.9%
		Industrial Product Price Index (IPPI) for February Provided by: Statistics Canada Official Release: Press Release IPPI y/y: -0.8% Producer price inflation cooled in February as prices for petroleum and coal slowed during the period. Lower inflation helps bolster the case for the Bank of Canada to lower rates if economic growth follows the US and begins to seriously erode. From the Release: "Prices for manufactured products edged up in February, as higher prices for primary metals were partly offset by lower prices for motor vehicles. The growth in raw materials prices was slowed substantially by a drop in crude oil prices. From January to February, prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), rose 0.1%, a marked slowdown compared with the increases of 1.1% in December and 1.0% in January. The growth in prices for petroleum and coal products slowed considerably after three months of vigorous increases. Excluding petroleum and coal products, the IPPI would have remained unchanged in February. Strong growth for primary metal products and, to a lesser extent, fruit, vegetables and feed products was largely offset by lower prices for motor vehicles and other transport equipment."
4/1	8:30am	Raw Materials Price Index	0.5%	2.6%	3.4%
4/4	7:00am	Employment Change	14.6K	15.0K	43.3K
		For March Latest Official Release from: Statistics Canada Canada's labor market has been strong with the last couple of months showing large increases. This month's 14,600 new jobs brought the numbers back to Earth. On top of smaller increase, there was a surge in people joining the labor force, which caused the unemployment rate to increase 2pts from its 33-year low, to 6.0%.
4/4	7:00am	Unemployment Rate	6.0%	5.8%	5.8%
4/4	10:00am	Ivey PMI	59.0	62.5	62.0
		"Ivey Purchasing Managers Index" for March Monthly Comment from: Purchasing Management Association of Canada The Canadian Dollar gave back its earlier gains against the US Dollar after its Ivey PMI slowed to 59 in March. This surprised forecasts on the downside, and was 3 points of February's level. The Loonie had come close to parity after the release of US Nonfarm payroll data fell by more than expected.
4/7	8:30am	Building Approvals	-1.0%	0.9%	-3.5% -2.9%
		For February Provided by: Statistics Canada Construction intentions in Canada cooled for a fourth consecutive month in February, on the heels of a sharp decline in the value of building permits for non-residential construction in Ontario. Municipalities issued $5.8 billion worth of building permits, down 1.0% from January. Intentions peaked in May and June 2007 at $7.0 billion. February's decline resulted from much lower non-residential construction intentions in Ontario. If the province were excluded, the total value of building permits nationally would have increased 9.8%, instead of declining 1.0%. The Canadian housing market have been on a downward slope since mid-year last year and is an example of the US housing woes's contagion.
4/8	8:15am	Housing Starts	255K	225K	257K
		For March Provided by: Mortgage and Housing Corporation Official Release: News Release From the Release: "The seasonally adjusted annual rate¹ of housing starts was 254,700 units in March, slightly down from 255,600 units in February, according to Canada Mortgage and Housing Corporation (CMHC). “The high level of starts posted in February continued in March, thanks to the multiple segment and particularly condominium starts, which registered a significant rise in Alberta” said Bob Dugan, Chief Economist at CMHC's Market Analysis Centre. “Nevertheless, the single-detached component, which is usually a strong trend indicator, decreased slightly. This is consistent with our view that the housing market will moderate gradually throughout 2008.” The results for March came in higher than expected, showing a resiliency in the Canadian housing market, despite the severe slowdown in the US. The USD/CAD pair has been trending up this week so far, though today's trading is somewhat sideways, with the housing start news, and the NY open giving the Loonie some small boost.
4/10	8:30am	Trade Balance	4.9B	3.4B	2.8B 3.3B
		For February in C$ Provided by: Statistics Canada Official Release: News Release The Canadian trade surplus jump to almost C$5 billion, as Canadian exports were up 3.8%, while imports declined 2%. The figure beat expectations of a smaller increase. The increase in exports was spread across all sectors and was at its highest level since May 2007. Exports of automotive products climbed 11.4%, energy products gained 3.8% (to a record C$9.7 billion), and industrial goods and materials were up 2.8%. From the Release: "Canada's merchandise trade surplus with the world expanded by more than $2 billion in February, in the wake of increases in all export sectors combined with a decrease in imports. Canadian companies exported $39.3 billion worth of merchandise, up 3.8% from January and the second consecutive monthly increase. In terms of constant dollars, a method used to isolate volume changes, prices remained flat, while export volumes rose 3.8%. At the same time, the value of merchandise imports fell 2.0% to $34.4 billion, the first decrease since October 2007. In constant dollar terms, prices fell 1.2% while volumes also declined 0.8%. As a result, Canada's trade surplus with the world jumped to $4.9 billion from a revised $2.8 billion in January. This was the largest monthly surplus since May 2007. The trade surplus with the United States soared to $8.1 billion, the biggest surplus in more than one year. Exports to the United States increased by 3.6%, while imports from the United States fell 3.4%. The trade deficit with countries other than the United States narrowed for the second straight month, falling to $3.2 billion, resulting from increased exports to Japan and the European Union, particularly the Netherlands and Italy."
4/11	8:30am	New Housing Price Index	0.3%	0.4%	0.6%
		For February Provided by: Statistics Canada Official Release: News Release From the Release: "The increase in new housing prices in Canada slowed in February, following two consecutive months in which the rate of growth was gaining speed. This deceleration continues the downward trend that started in September 2006. Nationally, contractors' selling prices rose 6.2% between February 2007 and February 2008, a slower pace than the year-over-year increase of 6.5% in January. Prices rose 0.3% between January and February, resulting in a New Housing Price Index of 158.1 (1997=100)."
4/14	8:30am	New Motor Vehicle Sales	-3.2%	-1.5%	8.2%
		For February Provided by: Statistics Canada Official Release: News Release From the Release: "The number of new motor vehicles sold fell 3.2% in February, after two months of very strong growth. New motor vehicle sales had recovered in December and January, following a downward trend in the second half of 2007.According to seasonally adjusted data from the New Motor Vehicle Sales Survey, consumers purchased 149,439 new vehicles in February, down 5,003 units from the previous month. Almost three-quarters of this decline was in Ontario. Looking ahead, preliminary industry data for March suggest that the number of new motor vehicles sold will remain relatively unchanged. Sales of both passenger cars and trucks declined in February. Sales of new trucks (which include minivans, sport-utility vehicles, light and heavy trucks, vans and buses) slumped 4.7% to 68,811 units. This drop follows the sharp increase in sales in December that was maintained in January."
4/14	10:30am	BOC Business Outlook Survey
		For Spring Quarter Provided by: Bank of Canada
4/16	8:30am	Manufacturing Shipments	1.6%	0.8%	1.3%
		For February Provided by: Statistics Canada Official Release: Press Release Manufacturing data for the month of February was rosier than expected, with shipments climbing 1.6% as the auto industry bounced back. The Canadian Dollar has been gaining this week as record high oil prices strengthened the currency. This session, the USD/CAD already fell around 100 pips in favor of the Loonie, and this news should buttress it further and let it hold on to its gains. The US on the other hand showed another round of weak housing data, pressuring the greenback. From the Release: "Sales of goods manufactured rose 1.6% to $50.1 billion in February, due in part to a gradual bounce-back by Canada's motor vehicle industry. This marked the second successive increase in manufacturing sales, as manufacturers continued to make up ground lost after a tough December (-3.7%). The volume of goods manufactured also improved in February. At 2002 prices, manufacturing sales rose 2.7% to $49.0 billion, following a 2.2% increase in January. Again, contributing to the boost in volumes produced were several automotive manufacturers who continued to ramp up production during the month."
4/17	7:00am	Consumer Price Index m/m	0.4%	0.3%	0.4%
		For March Latest Release Provided by: Statistics Canada CPI y/y: 1.4%, forecast 1.4%, pr. 1.8% Bank of Canada Core CPI m/m: 0.2%, forecast 0.3%, pr. 0.5% Bank of Canada Core CPI y/y: 1.3%, forecast 1.4%, pr. 1.5% Consumer prices fell to an annual rate of 1.4% from 1.8%, a significant cooling in inflation. Core CPI year over year lowered to 1.3% from 1.5%. The Bank of Canada has been lowering rates as the Federal Reserve has in order to shore up economic growth. These numbers will give the Bank policy members more leeway in deciding if further rate cuts are warranted. On a monthly basis, CPI was up 0.4%, which matched February's level. The core monthly level eased back fro m0.5% to record a 0.2% increase. From the Release: "Consumer prices rose 1.4% on average in the 12 months to March 2008, the fourth consecutive month in which the rate of growth has decelerated. This was the slowest rate of growth since January 2007. The main upward factor in March was mortgage interest cost, which rose 8.3%, while gasoline prices were the second most significant contributor. Prices at the pump rose by 7.9% between March 2007 and March 2008, less than half the rate of growth of 17.1% posted the previous month. If pump prices are excluded, the all-items Consumer Price Index (CPI) increased 1.0% in the 12 months to March 2008. The 12-month change in the Bank of Canada's core index, which is used to monitor the inflation control target, rose 1.3% in March, down from the 1.5% increase in February. This deceleration was mostly attributable to lower prices for automotive vehicles. Consumer prices rose 0.4% between February and March 2008, the same rate as in the preceding period. The core index increased by 0.2% between February and March 2008, a slowdown compared with the 0.5% increase during the previous period."
4/17	7:00am	CPI excl. Volatile Items	0.2%	0.3%	0.5%
		For March, Month-over-month Bank of Canada Consumer Price Index Core Provided by: Statistics Canada Core CPI y/y: 1.3%, forecast 1.4%, pr. 1.5% The core rate for CPI came in lower than the the consensus of forecasts. On the month inflation grew 0.2% for a 1.3% year-on-yaer gain. Lower core inflation will give the central bank policy members more leeway in deciding if further rate cuts are necessary. The annual core rate was the smallest since July 2005. Gasoline prices were up 3.6% m/m and 7.9% y/y in March. In february gas prices had surged by 17.1%.
4/18	8:30am	Wholesale Sales	-1.8%	0.4%	2.6%
		For February Provided by: StatCan Official Release: News Release The Canadian Dollar retested yesterday's low (1.0144) against the Dollar in early NY trading after wholesales data disappointed on the downside. However, after about an hour the pair had pared those losses and was moving in favor of the Loonie. From the Release: "After starting the year on a positive note, wholesale sales reversed course in February as declines in a number of sectors erased all of January's gains. Sales by Canadian wholesalers fell 1.8% in February to $42.6 billion. Most sectors reported lower sales during the month, with the largest decline (-4.0%) coming in the automotive sector. There were also notable drops in the "other products" (-3.4%) sector, which includes wholesalers of agricultural chemicals, recycled materials, paper products and non-agricultural products, as well as the personal and household goods (-2.4%) and building materials (-2.2%) sectors. The only two bright spots were the food, beverage and tobacco products sector (+0.7%), which was buoyed by a turnaround in alcohol and tobacco sales, and the farm products sector (+4.3%), which recovered from a weak start to the year. Wholesale sales have been trending gradually downwards since July 2007, largely as a result of a significant decline in the automotive sector. Prior to this, sales had undergone a period of sustained growth that began in July 2003."
4/18	8:30am	Leading Indicators	0.0%	0.1%	-0.2% -0.3%
		For March Provided by: Statistics Canada Official Release: News Release From the Release: "The composite leading index was unchanged in March, after a decline in February followed an increase in January. Of the 10 components, 6 rose in March, up from 4 the month before, as both housing and new orders for durable goods rebounded from large declines. Overall, household spending continued to lead growth, while the stock market replaced manufacturing as the weakest sector of the economy. All the components related to household spending advanced. Outlays for durable goods posted a third straight gain, as auto sales remained on a strong upward trend. The housing index rebounded 0.2% after five straight declines. Manufacturing remained mixed. Export demand continued to reel from declines in the United States, which was reflected in a seventh straight decline in its leading index. However, new orders rebounded 0.6%, helped by gains for investment goods and a partial recovery for autos. This gain in orders was not reflected in higher shipments, and this lowered the ratio of shipments to inventories for a second straight month. The downward trend of the stock market deepened for a fifth straight month, and its 1.9% drop was the most of any component."
4/21	8:30am	International Securities Transactions	3.8B	1.5B	0.94B 0.92B
		For February Provided by: Statistics Canada Official Release: News Release Foreigners purchases C$3.8 billion worth of Canadian securities in February, better than expected. In addition to the report which reported strong demand for Canadian bonds and stocks, though holdings of money market instruments was down. The Canadian Dollar benefited today from oil hitting a fresh record of $117 per barrel. From the Release: "Canadians sharply increased their holdings of foreign securities by $6.1 billion in February. This reflected a rebound in the demand for both foreign stocks and bonds. Meanwhile, non-residents acquired $3.8 billion worth of Canadian securities over the month, their largest monthly purchase since April 2007. Canadian dollar-denominated outstanding bonds accounted again for the majority of the foreign investment."
4/22	9:00am	BOC Interest Rate Statement	3.00%	3.00%	3.50%
		Provided by the Bank of Canada Official Release: Press Release The Bank of Canada cut rates by 50 basis points as the drag in the US economy has consequences on the Canadian economy. Exports are expected to decline, and tight credit conditions will moderate business investment and consumer spending. From the Release: "Growth in the global economy has weakened, reflecting the effects of a sharp slowdown in the U.S. economy and ongoing dislocations in global financial markets. Growth in the Canadian economy has also moderated as buoyant growth in domestic demand, supported by high employment levels and improved terms of trade, has been substantially offset by the fall in net exports. While both total and core CPI inflation were running at about 1.5 per cent at the end of the first quarter, the underlying trend of inflation is judged to be about 2 per cent, consistent with an economy that was operating just above its production capacity. The Bank is now projecting a deeper and more protracted slowdown in the U.S. economy... The Bank projects that the Canadian economy will grow by 1.4 per cent this year, 2.4 per cent in 2009, and 3.3 per cent in 2010.... In line with this outlook, some further monetary stimulus will likely be required to achieve the inflation target over the medium term. Given the cumulative reduction in the target for the overnight rate of 150 basis points since December, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada."
4/23	8:30am	Retail Sales	-0.7%	0.3%	1.4% 1.5%
		Monthly Rate for February Provided by: Statistics Canada Official Release: News Release Retail sales unexpectedly declined in February, declining 0.7%. The Canadian Dollar fell to the US Dollar following the release, reaching a new high for the week as the USD/CAD pair tested the 1.02 level in early NY trading. From the Release: "After a strong start to the year, retailers reported their first sales decrease in five months in February. Retail sales fell 0.7% in February to an estimated $35.5 billion. None of the eight retail trade sectors showed higher sales in February, and two posted reductions of 1.0% or more. Despite the decline in February, and moderate sales in the middle of 2007, retail sales have generally been rising at a rapid clip since 2004. Following four months of strong increases, sales in the automotive sector decreased 1.3% in February. Excluding sales by dealers of new, used and recreational vehicles and auto parts, retail sales edged down 0.3% in February, the second decrease in seven months. Sales in the clothing and accessories stores sector fell 1.0% in February. Following a period of strong growth that began in 2006, sales for this sector have been rising at a much slower pace since the middle of 2007."
4/23	8:30am	Retail Sales excl. Autos	-0.3%	0.5%	1.3%
4/24	10:30am	BOC Monetary Policy Report
		Provided by: Bank of Canada Official Release (Summary): PDF Official Release (Full Report): PDF Highlights from the Release: • The U.S. economic slowdown is deeper and more protracted than previously anticipated. • Slowing global economic growth and ongoing financial market turbulence will have direct consequences for the Canadian economy. • Canadian GDP is projected to grow by 1.4 per cent in 2008, 2.4 per cent in 2009, and 3.3 per cent in 2010. • Both core and total CPI inflation are projected to be slightly below 2 per cent in 2009 and to return to 2 per cent in 2010. • The risks around the Bank's base-case projection for inflation appear balanced. • Some further monetary stimulus will likely be required to achieve the inflation target.
4/30	8:30am	Producer Price Index m/m	1.7%	0.9%	0.2% 0.1%
		Industrial Product Price Index (IPPI) for March Provided by: Statistics Canada February's Release: Press Release IPPI Canadian producer inflation index accelerated to 1.7%, fueled by surges in prices for petroleum and coal products, as well as for primary metal products (5.9%) . Excluding energy products, the IPPI would have marked 0.8%. RMPI Raw materials surged 6.6% in March, the highest monthly increases since September of 1990. Mineral fuels were the main contributor to inflation of raw materials. The inflation reports' impact overwhelmed that of the poor GDP report. This is becoming a deja vu of economic developments as central banks across the world are dealing with the duality of economic growth risk, and inflationary risk.
4/30	8:30am	Raw Materials Price Index	6.6%	1.9%	0.5%
		Raw Materials Price Index (RMPI) for March Provided by: Statistics Canada IPPI Canadian producer inflation index accelerated to 1.7%, fueled by surges in prices for petroleum and coal products, as well as for primary metal products (5.9%) . Excluding energy products, the IPPI would have marked 0.8%. RMPI Raw materials surged 6.6% in March, the highest monthly increases since September of 1990. Mineral fuels were the main contributor to inflation of raw materials. The inflation reports' impact overwhelmed that of the poor GDP report. This is becoming a deja vu of economic developments as central banks across the world are dealing with the duality of economic growth risk, and inflationary risk.
4/30	8:30am	Gross Domestic Product	-0.2%	0.2%	0.6%
		For the month of February Provided by: Statistics Canada Wholesaling activities shrank 1.4%, mostly affected by declines in sales of motor vehicles and building supplies. Manufacturers scaled back as well, with valued added falling 0.7% in February. 16 out of 21 major groups decreased, and both durable and non-durable goods both declined. Only the construction industries and the public sector of education health and administration saw growth. More rate cuts may be in order here as contraction was spread out. However, a notable part of the tepid economic pace in February can be contributed to "inclement weather". Also, the Canadian Dollar surged as European trading started, and extended gains across the board despite the poor GDP report. Other releases showed that inflation may be a major deterrent in central bank's moving forward with a rate cut campaign. From the release: Economic activity declined 0.2% in February, continuing at a much lower pace than in the first half of 2007. Wholesale trade and manufacturing accounted for most of the decrease. Other notable declines were recorded in retail trade, oil and gas extraction and exploration as well as in the transportation and financial sectors. Advances in the tourism and government-related industries and in construction were not enough to offset these declines.

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Central Bank Watch - Latest Bank of Canada Decision

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October
8th, 2008

Actual

Forecast

Revised Form

2.50%

3.00%

N/A

Provided by: Bank of Canada
Official Release: Press Release

From the Release: "The intensification of the global financial crisis is having a marked impact on all countries. In recent weeks conditions in global financial markets have deteriorated sharply, the U.S. economy has weakened further, and commodity prices have fallen abruptly.

As a result of these developments, credit conditions in Canada have tightened significantly, despite the relative health of our financial institutions. Weaker growth in the United States and other important trading partners will increase the drag on the Canadian economy coming from net exports. The deterioration of our terms of trade will act to moderate the growth of domestic demand. While the recent depreciation of the Canadian dollar will help cushion the effects of the weaker global outlook on the domestic economy, it will not completely offset them.

Below-potential growth in aggregate demand through 2009, combined with a lower profile for commodity prices, will significantly ease inflation pressures in Canada.

In view of these developments, the Bank of Canada decided to join other major central banks and lower its target for the overnight rate by 50 basis points today. This action will provide timely and significant support to the Canadian economy."

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Central Bank Watch - Bank Officials' Comments

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November 01 (BOC Governor Dodge) -- The Canadian dollar has seen some selling pressures stemming from comments over the weekend by Bank of Canada Governor Dodge. Speaking to reporters at the G-20 meeting of finance ministers and central bankers in South Africa, Dodge said that financial market volatility and downside risks to the world economy have increased since early October, and that this "clearly poses a risk that we are going to have to take into account when setting our own policy.

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Economic and Financial Profile

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Exports Oil and Commodities:

The Canadian Dollar is influenced by prices for oil and other commodities. Canada is the 12th largest exporter of oil in the world (1.1 mil barrels per day), with most of it going to the United States. The country is also the 7th largest producer of oil (3.3 m. b. per day) which it uses domestically. It is also a world leader in the production of gold, nickel, uranium, diamonds, and lead. A strong rise of the price of oil and commodities has helped boost appreciation of the Canadian Dollar, especially in Sept/Oct 2007. This can be seen in longer term too.

Closely Tied To United States:

The Canadian Dollar is strongly impacted by economic conditions in the United States, as the U.S. is Canada's main trading partner in terms of exports (80%) and imports (66%). A downturn in US spending means less activity for certain export industries in Canada. This cross border trade is sensitive to the exchange rates between the US and Canadian Dollars, as a stronger Canadian Dollar will make Canadian exports more expensive, and US imports cheaper for Canadian consumers.

Financial institutions in Canada are also tied to activities on Wall Street, and the performance of certain US sectors, especially banking and finance. This has been seen recently as sub-prime mortgage woes have manifest themselves on Canadian banks balance sheets and lowered the Canadian stock markets.

Appreciation vs the Dollar:

The Loonie, a nickname for the Canadian Dollar, hit a record low versus the Dollar in 2002. At that time 1 US Dollar was worth C$1.58. The last 5 years have changed thing dramatically as the currencies hit parity in September 2007, and in November '07, the exchange rate stood at 1 US dollar = C$.905. The Loonie had appreciated 42% in that span gains accelerating during 2007. This strong appreciation was a result of American currency and economic weakness and high prices for Canadian exports such as oil, gas, and metals.

This figure is a monthly chart, of the USD/CAD pair. Prices moving upward favor the strength of the US Dollar (the top currency in the USD/CAD quote). When prices move down they favor the Canadian Dollar (the bottom currency in the pair).